Italy to cut spending by 26 billion euros

Italy to cut spending by 26 billion euros

ROME - Agence France-Presse
Italy to cut spending by 26 billion euros

Italian Premier Mario Monti gestures as he speaks during a press conference. AP photo

The Italian government agreed overnight July 5 on a series of measures to slash public spending by 26 billion euros ($32 billion) over three years, including major payroll cuts.

“The economies in this measure will be 4.5 billion (euros) in 2012, 10.5 billion in 2013 and 11 billion in 2014,” said Prime Minister Mario Monti.

Much of the savings will be found in the health and public administration budgets, said Monti.

Deputy Economy Minister Vittorio Grilli said the planned measures would lead to a 20 percent reduction in the number of

public sector managers and a 10 percent cut in the ranks of ordinary public sector workers.

 Such cuts will further upset the country’s trade unions and heighten the threats of strikes.

In April, the government had decided in principle to cut 4.2 billion euros off this year’s spending account, but now Rome sees the need for deeper cuts.

Monti said the cuts were needed to avoid a two percentage point hike in sales tax which would otherwise be necessary.

The Italian cabinet met for seven hours before reaching agreement on the measures, a sign of the difficulty the government is having in finding areas in the budget from which the savings can be extracted without hitting services, and public sentiment, too hard.

 “We wanted to avoid across-the-board cuts, preferring a more complex but more effective plan,” said Monti.

The measures are the fruit of a report by Piero Giarda, the parliamentary relations minister, charged by Monti with carrying out a spending review.